The lawsuit alleges that Senator Espada created a personally owned, for-profit management company, Espada Management, as a vehicle to siphon money from Comprehensive Community Development Corporation (“Soundview”), the Bronx-based not-for-profit where Espada is founder and CEO. The money flowed from Soundview to Espada Management, run by Pedro G. Espada, by means of a contractual arrangement that called for Espada Management to supply janitors for the Soundview medical clinics.
The lawsuit alleges that Senator Pedro Espada, Jr. and Pedro G. Espada devised and operated a sham job training program to minimize costs and maximize profits at Espada Management. The program mischaracterized workers as trainees who were then paid wages that were far below what New York State law requires. The trainees typically worked for a two week period with little training or direction and performed tasks such as cleaning bathrooms, mopping floors, and sweeping – the same tasks a full-time janitor performed. During the program, the workers were paid a fraction of the wages mandated by law, some making less than $70 per week, or the equivalent of under $1.70 per hour. Paychecks were signed by either Senator Espada or his son.

“This was a sham job training program pure and simple with workers receiving no training and getting virtually no jobs,” said Attorney General Cuomo. “Espada ripped off his own community in order to maximize the amount of money he could siphon out of the Soundview clinic, according to our Complaint. The Espada business model at Soundview appears to have been based on lies and deceit, abusing hardworking people for profit and cheating the state out of tax dollars.”

The lawsuit alleges that the workers were lured into the program with false promises of potential jobs and job training, but in the end, most were just replaced by other trainees, also making below minimum wage. Since 2005, at least 100 workers have been victimized by this program.

At the end of the program, trainees received a “Certificate of Completion of Healthcare Maintenance Internship.” The certificates were signed by Pedro G. Espada and were “for Fulfillment of JCAHO standards maintenance training program.” The lawsuit alleges that these certificates are worthless and misleading. The initials “JCAHO” on the certificate stand for the “Joint Commission on Accreditation of Healthcare Organizations.” That organization knew nothing of the Espadas’ program, did not authorize its name to any such program, did not provide or publish standards for janitorial services that might be the subject of a training program, and has no curriculum whatsoever that would support such a program.

The lawsuit also alleges that permanent employees of the janitorial company were not paid proper overtime wages, and, in some cases, were not paid for any of the overtime hours that they worked.

The Attorney General’s lawsuit alleges the Espadas have not only cheated employees, but have short-changed New York State as well. According to the lawsuit:

* No pay stubs existed.
* No state unemployment taxes were paid.
* No tax deductions were made as required by law.
* Workers’ Compensation coverage was not obtained.

The lawsuit seeks, among other things, to:

* Order the defendants to pay restitution and damages for unpaid wages.
* Award interest as allowed by law.
* Order Defendants to implement new policies to prevent abuse of workers.
* End the janitorial training program.

Senator Espada founded Espada Management in 2007. Pedro G. Espada, who is also an employee of Soundview, was put in charge of the company when it began operations in 2008. A bidding process was then rigged to ensure that Soundview would award Espada Management with a contract to perform janitorial work. That contract is worth almost $400,000 annually. In 2008, Pedro G. Espada earned more than $150,000 from Espada Management and from Soundview.

The civil lawsuit was filed today in the Supreme Court of the State of New York, New York County. The civil lawsuit alleges the defendants violated Sections 195, 652, and 661 of New York State Labor Law by willfully failing to pay minimum wages and failing to maintain proper employment records. The lawsuit also alleges the all the defendants violated Sections 142-2.2, 142-2.4 and 142.2-of the New York Codes, Rules, and Regulations. Finally, the lawsuit also alleges that the conduct at issue represented a persistent and repeated illegality in violation of NY Executive Law Section 63(12).

BACKGROUND INFORMATION

Last week, Attorney General Cuomo filed a lawsuit filed against Senator Espada for diverting Soundview’s charitable assets and using the money for himself, his family, his friends, and his political operation. Nineteen current and former officers and directors of Soundview are also named in the lawsuit. The lawsuit alleges that in the past five years, Senator Espada has siphoned more than $14 million out of Soundview, including an unconditionally guaranteed severance package worth an estimated $9 million that was put into a contract signed in 2005. The lawsuit seeks to permanently remove Senator Espada and current CFO Kenneth Brennan as officers of Soundview and, similarly, to remove all of Soundview’s directors from the Board. The lawsuit also seeks restitution from Senator Espada.

Also last week, the Attorney General served the New York State Senate with a subpoena calling for the production of records related to ten Senate employees who also served on the board or were employed or retained by Soundview or its affiliated companies. The subpoenas seek records pertaining to application and hiring, time and attendance, as well as travel and expenses for the Senate personnel.

Additionally, last week investigators from the Attorney General’s office, the Federal Bureau of Investigation, and the Internal Revenue Service executed a search warrant on Soundview as part of an ongoing criminal probe.

The lawsuit is available at www.ag.ny.gov.

The investigations into Senator Espada and Soundview are ongoing.

This case is being handled by Assistant Attorney General Nathan Reilly, Assistant Attorney General Mina Kim, and Chief of the Labor Bureau Patricia Kakalec.

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